Hollande faces bruising entry onto world stage

The moment France's president-elect Francois Hollande is sworn in on Tuesday, he leaves his cosy post-election no-man's land for potentially bruising encounters on the European and world stage.

13.05.2012

(AFP) The moment France's president-elect Francois Hollande is sworn in on Tuesday, he leaves his cosy post-election no-man's land for potentially bruising encounters on the European and world stage.

Hours after naming a prime minister, France's first Socialist leader since 1995 will fly to Berlin for talks with Chancellor Angela Merkel, an ally of the man he defeated last week, centre-right president Nicolas Sarkozy.

Hollande campaigned on a pledge to renegotiate the eurozone's fiscal pact agreed in March, which binds member states to austerity measures and which Merkel argues is essential to underpin the continent's eventual recovery.

The meeting between the leaders of Europe's economic powerhouses will be closely watched by European Union partners and by the financial markets that Hollande declared during campaigning were "the enemy."

"We have positions that are not yet converging," Hollande admitted on Thursday of his upcoming talks with Merkel, while German officials have sought to play down the encounter.

"It's, of course, not a decision-making meeting but a getting-to-know-you meeting, a first get-together," Merkel's spokesman Steffen Seibert said on Friday.

Merkel wants to hear Hollande's "ideas about fiscal discipline and the promotion of economic growth and jobs," Seibert said.

Ideas raised at their talks are expected to be developed at an informal EU dinner summit on May 23 with a possible growth deal to be announced at the full-fledged EU summit on June 28 and 29.

Market analysts are reassured that Hollande does not reject the budgetary pact itself, but simply wants to add growth stimulus measures, and traders are also keen to avert a vicious circle of recession and austerity.

Ahead of the talks, Hollande, who has no ministerial experience, this week met with the head of the Eurogroup of eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, and EU president Herman Van Rompuy

He has also consulted Italian caretaker Prime Minister Mario Monti who supports both Merkel's austerity and Hollande's call for growth and could work as a mediator between competing ideologies within the EU.

Hollande was forced on the defensive on Friday when the European Commission warned France's weak growth was slowing and would struggle to reach 1.3 percent of GDP next year, less than the 1.7 percent Hollande has forecast.

Michel Sapin, author of Hollande's election manifesto, said that Brussels' pessimism was based on the poor performance of Sarkozy's government and that the new team would do better than the EU forecast.

If it is perceived that France is struggling to meet its targets, bond markets might express their concern in the form of higher interest rates on the borrowing Paris relies on to fund its deficit-spending.

Within hours of the announcement of Hollande's victory, France on Monday raised 7.98 billion euros ($9.1 billion) in short-term debt at low rates.

But Wednesday's sale of nine million euros in medium and long-term bonds will be the first since he has taken office and is being seen as a key test of his policies.

Hollande then heads to Washington to meet President Barack Obama, who has said that Europe is still struggling with its financial crisis because it did not follow the US path of trying to stimulate its economy.

Obama is to receive Hollande at the White House for talks during the day on Friday, before they join other G8 leaders -- from Britain, Canada, Germany, Italy, Japan and Russia -- for talks at Camp David outside Washington.

US envoys were in Paris on Friday to prepare Hollande's visit to the White House and a NATO summit in Chicago on Sunday, May 20, during which he is to outline his withdrawal strategy from Afghanistan.

Hollande has already caught flak for saying he will bring forward the withdrawal of French troops from the NATO-led coalition in Afghanistan from the end of 2014 to the end of 2012.

France's 3,400 troops form the fifth largest contingent in the 130,000-strong US-led force battling the Taliban, but Kabul has downplayed the effect of their early departure, saying Afghan troops are ready to take over.